TEI comments on Canadian budget proposals on deferral of corporate tax in respect of investments in partnerships.

PositionTax Executives Institute

June 21, 2011

On June 21, 2011, Tax Executives Institute submitted the following comments to Canadian Minister of Finance James M. Flaherty on a June 6, 2011, Budget proposal that will limit the deferral of partnership income earned by corporate partners. The Institute's comments were prepared under the aegis of the Canadian Income Tax Committee, whose chair is Carmine A. Arcari of the Royal Bank of Canada. Contributing substantially to the development of TEI's comments was Lynn A. Moen of Walton Group International, Inc., and Marvin E. Lamb of Imperial Oil Limited. Also contributing was Rodney C. Bergen of The Jim Pattison Group. Jeffery P. Rasmussen, Senior TEI Tax Counsel, serves as legal staff liaison to the Canadian Income Tax Committee and coordinated the preparation of this submission.

On June 6, 2011, the government released a Budget message with draft legislative proposals to amend various provisions of the Income Tax Act, Canada (the Act). The tax proposals, including those ending deferral of corporate tax by corporate investors in partnerships, generally mirror those released on March 22, 2011. On behalf of Tax Executives Institute, I urge the Department of Finance to lengthen the transition relief period for the recognition of the deferred partnership income. In addition, we offer recommendations relating to "Under-Reported Stub Period Accrual" and "Single-tier Alignment Election."

Tax Executives Institute

TEI is the preeminent international association of business tax executives worldwide. The Institute's nearly 7,000 professionals manage the tax affairs of 3,000 of the leading companies in North America, Europe, and Asia. Canadians constitute 10 percent of TEI's membership, with our Canadian members belonging to chapters in Calgary, Montreal, Toronto, and Vancouver, which together make up one of our nine geographic regions, and must contend daily with the planning and compliance aspects of Canada's business tax laws. Many of our non-Canadian members (including those in Europe and Asia) work for companies with substantial activities in Canada. The comments set forth in this letter reflect the views of TEI as a whole, but more particularly those of our Canadian constituency.

TEI concerns itself with important issues of tax policy and administration and is dedicated to working with government agencies to reduce the costs and burdens of tax compliance and administration to our common benefit. In furtherance of this goal, TEI supports efforts to improve the tax laws and their administration at all levels...

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